March 23, 2017

Adidas And Television

Adidas made some headlines this week when their new-ish ceo announced that they were no longer going to use television advertising and were going to put all their advertising money online.

The purpose of this move, according to the ceo, was to quadruple online sales in the next 3 years.

A few thoughts:

First, this doesn't sound like a change in ad strategy as much as a change in business strategy.

"All of our engagement with the consumer is through digital media and we
believe in the next three years we can take our online business from
approximately 1 billion (euro) to 4 billion (euro) and create a much
more direct engagement with consumers."

From this language, it sounds like Adidas is switching from a typical retail sales strategy to an online direct response strategy.

The only problem is, from numbers I've been able to dig up, only 6% of their sales are online. Adidas annual sales are about $17b, about $1b of
which is the result of e-commerce. The risk-reward element seems completely out-of-whack to me. Do you really want to spend 100% of your advertising money
to support 6% of your sales?

This change in strategy could cause serious erosion of distribution at retail. I doubt that retailers will be happy about Adidas spending all its money to support its own online store sales and no money to support theirs.

Over several decades, Adidas has spent hundreds of millions - if not billions - on TV and other traditional ad media.
In so doing it has established a successful and well-known brand.
Milking the brand of its value by converting it to direct response may provide some short-term sales lift, but is likely to do damage long-term.

By the way, what TV advertising? I watch almost nothing but sports on TV and in the recent past I can't remember the last time I saw an Adidas spot. This means one of three things: either the whole "no more TV" stuff is horseshit, or their media buying is lousy, or their creative is so weak I can't even remember it.

Or maybe he is not envisioning a refocus to direct response and believes he can boost all sales with a purely online advertising effort. Let's do some math.

In the past year, Adidas grew by 16%. Projecting that growth over the next 3 years they would be at about $25.5 billion in sales. Quadrupling their online sales without growing their retail business would leave them with about $20 billion in sales. So even if they achieved their magnificent online growth, they still have to grow their retail business by about 10% annually to get to that $25.5 number. I'm curious to see how well they can do at achieving 10% annual growth in offline sales with 100% online advertising. This should be fun.

"Shakespeare was a storyteller. You're a copywriter.""Good ads appeal to us as consumers. Great ads appeal to us as humans.""As an ad medium, the web is a much better yellow pages and a much worse television."

"Sometimes success in the advertising business requires sitting quietly and letting clients proceed with their hysterical delusions."

"Marketers prefer precise answers that are wrong to imprecise answers that are right."

"Brand studies last for months, cost hundreds of thousands of dollars, and generally have less impact on business than cleaning the drapes."

"The idea that the same consumer who was frantically clicking her TV remote to escape from advertising was going to merrily click her mouse to interact with it is going to go down as one of the great advertising delusions of all time."

"Nobody really knows what "creativity" is. Every year thousands of people take a pilgrimage to find out. This involves flying to Cannes, snorting cocaine, and having sex with smokers."

"Marketers habitually overestimate the attraction of new things and underestimate the power of traditional consumer behavior."

"We don’t get them to try our product by convincing them to love our brand. We get them to love our brand by convincing them to try our product."

"In American business, there is nothing stupider than the previous generation of management."

"If the message is right, who cares what screen people see it on? If the message is wrong, what difference does it make?"

"The only form of product information on the planet less trustworthy than advertising is the shrill ravings of web maniacs."

"There's no bigger sucker than a gullible marketer convinced he's missing a trend."

"All ad campaigns are branding campaigns. Whether you intend it to be a branding campaign is irrelevant. It will create an impression of your brand regardless of your intent."

"Nobody ever got famous predicting that things would stay pretty much the same."